The second quarter showed record high ratio of mortgage debt to GDP

The recent report by Statistics Canada says the ratio of national mortgage debt to GDP was already above 80%.

In Q2, the volume of mortgage debt was equivalent to 84.28% of GDP. Meanwhile, it was 69.13% a year earlier, and 59.02% – ten years ago.

“In other words, during that period, mortgage debt showed growth over 40% faster than GDP,” – Better Dwelling noted. “As the ratio was only 39.62% in 2000, it’s a sharp gain, particularly in case the economy doesn’t rebound to pre-pandemic levels in the nearest future.”

Such a strong growth was already obvious before the pandemic this year, with mortgage debt reaching 72.64% of GDP.

“It points to a significant dependence on debt-driven growth, which has never historically showed optimistic outcomes,” – Better Dwelling noted. “With debt loads increasing, more future spending is postponed. The more debts we have, the more future growth is being used.”

However, the national household debt service ratio was down from 14.54% to 12.4% during the first half of this year. Household debt as a share of household disposable income also fell from 175.4% to 158.2%, as household disposable income rose by 10.8% and the stock of credit market debt was almost unchanged,” – StatsCan said.

Combined, these tendencies may lead to more delinquencies and insolvency applications next year.

“We’ll probably see more challenges in the nearest future,” – believes Ksenia Bushmeneva, an economist at TD Bank. “Support measures will eventually be reduced, and the state of the job market and consumer finances cannot diverge forever.”